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Dear John – do I need landlord insurance?

What is landlord insurance? John Symond from Aussie Home Loans answers this, and a reader’s question: Do I need landlord insurance?

Q: I have just bought an investment apartment for $420,000, I have a mortgage of $380,000, with monthly repayments of about $2,100. I receive monthly rent of about $1,600, so I am short $500 each month. Some friends have suggested I take out landlord insurance but this adds to the costs. Do I need landlord insurance?

A: I believe landlord insurance is always worthwhile. An investment property is a really valuable asset, so it’s important to protect it.

What is landlord insurance?

Landlord insurance is insurance cover for property owners who are renting out a property to tenants. You are still responsible for responding to day-to- day maintenance requests and even emergency property maintenance – landlord insurance is designed to protect you from bad tenants and malicious behaviour and damage.

While most general home and contents insurance policies will typically cover you for things like damage to the building, some contents like fixtures and fittings, as well as theft, fire, storm and so on, they won’t protect you against tenants who don’t care as much about your investment property as you do.

What does landlord insurance cover?

Landlord insurance can cover you in case of:

Theft by the tenant or their guests

Malicious damage by tenants or their guests

Legal expenses if you take action against a tenant

Liability if a claim is made against you

Loss of rent if the tenant defaults on their payments or leaves early.

While protecting yourself against these things will come at a cost, it could be a worthwhile expense if things don’t go according to plan. As well as providing peace of mind if something goes wrong, the landlord insurance premium may be tax deductible, so make sure you keep your receipts and give them to your accountant to maximise your return come tax time.

Landlord insurance and strata

If your investment property is a strata managed apartment or townhouse, you may already be covered for the building and legal liability for public areas. Ask your body corporate: Do I need landlord insurance? What does the strata insurance policy cover me for?

Know what your landlord insurance covers

No two insurance policies are the same. Some landlord insurance cover is supposed to be taken out in addition to your home and contents insurance policy, while other landlord insurance policies may be more comprehensive.

If you decide to go ahead make sure you read Product Disclosure Statements carefully so you know what is, and more importantly what isn’t, covered.

Do you have landlord insurance? Why do you think it’s important?

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About John Symond

John Symond is the Founder and Executive Chairman of Aussie. Widely credited with bringing competition to the Australian home lending industry, John forced the banks to drop their mortgage interest rates and lift their service levels. He is well known as a consumer champion, and is passionate about helping all Australians to achieve the dream of home ownership and be in a better financial position.

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